Very informative article here about the current state of the Social Security system.
The number of beneficiaries of the system reached a record in November 2017 of nearly 62 million. Yet, the number of full time workers who are paying into the system is only 2.05 per each beneficiary. Don’t forget this number of workers is also when unemployment is at a low not seen since 2000 at 4.1%.
Doesn’t take a rocket scientist to figure out what this means. A return to a higher unemployment rate would be lights out for the system. However, even if we maintain low unemployment the system is still going to go bankrupt. It’s only a matter of time.
But this ‘warning’ is nothing new. We’ve been hearing it for years and yet nothing other than small tweaks have been done; A raise of the Full Retirement Age from 66 to 67 for those born after 1960. Getting rid of the “File and Suspend” opportunity in 2015. These are all helpful for program solvency but really is not going to amount to much in the long run, not with only 2 full time workers paying for each beneficiary.
However, the point I want to make here in this post revolves around this: The record 61,859,250 Social Security beneficiaries in November, included 45,439,781 retired workers and their dependents; 5,992,862 survivors of deceased workers; (emphasis mine.)
How many of those receiving survivor benefits are widows, living on their own, just barely able to make ends meet? After all, for a beneficiary to get survivor benefits means she loses her own benefit. She can’t get BOTH, her own, and her deceased husbands. She can only get the greater of the two.
Let’s say we have a husband who was receiving $1500 a month and the spouse who was receiving her SPOUSAL benefit of half that, $750 a month. Between them they were pulling in $2250 in Social Security benefits
But now he’s dead. Thus the survivor loses the less of the two, in this case, she gets his $1500 a month but that’s it. Now she is living on $1500 a month. Is that enough???
I don’t know. But we do know that according to my last post that Premature death is one of the major causes of impoverishment in America. How do you define premature? Well, I’d say it’s premature if a husband dies and leaves his spouse without much to live on, wouldn’t you? Ideally, they should die at the same time.
But if he goes to his greater reward and now the wife is living on 33% less income with nearly the same expenses, well, it goes without saying his death was premature.
Worse of all is that if this couple only did some BASIC financial planning, much of this woe and impoverishment could have been avoided! Some simple number crunching to determine when the most optimal time to take Social Security for the husband would have been.
If he would have waited until he was 70 he would have received Delayed Earnings Credits of 8% a year which would have made his benefit. These credits would have meant he’d receive over $2000 a month… for the rest of his life without even accounting for inflation. Then when he died, his surviving spouse would sacrifice her own $750 a month for a $2040 benefit as opposed to a $1500 a month benefit. That extra $540 a month could have gone a LONG way to keeping her above water.
It’s imperative that you understand how the Social Security system works. I can’t stress this enough. You need to understand the difference between YOUR benefit, your SPOUSAL benefit and your SURVIVOR benefit before you make any irrevocable decision when to take Social Security.